what percent of amazon is dropshipping

in this video i'm going to break down,the pros and cons of amazon drop,shipping and help you determine whether,this ecommerce business model is worth,doing,if you enjoyed this video don't forget,to hit the subscribe button and be sure,to hit the bell button to be notified,when new videos come out now having been,an e-commerce since 2007 i've seen many,popular ecommerce business models crash,and burn and through all the years that,i've been doing this one lesson always,rings true if it sounds too easy and too,good to be true then it probably won't,last and amazon drop shipping falls into,this category now first off i want to,say that there is money to be made by,drop shipping on amazon and it's,probably one of the least expensive ways,to get started selling online with,practically zero upfront monetary risk,but before you jump the gun i want you,to ask yourself a few important,questions would you rather launch a,business that makes a couple bucks here,and there in the short term or would you,rather build a branded business that can,stand the test of time well today i'm,going to analyze the pros and cons of,the amazon drop shipping business model,and provide you with an accurate picture,so you can decide whether you want to,give amazon drop shipping a try,now what is amazon drop shipping well,amazon drop shipping is an ecommerce,business model where you sell physical,products on amazon without having to,deal with inventory shipping handling or,customer service so basically amazon,your supplier handles all the heavy,lifting for you when you make a sale on,amazon you simply notify your drop,shipper and they ship your products,directly to the amazon customer on your,behalf,now you don't touch a single product in,the process there's almost zero upfront,costs outside of signing up for an,amazon account and you don't have to buy,any inventory whatsoever until the item,has been sold,now the low risk aspect of drop shipping,on amazon makes it an appealing business,model because anyone can do it and you,don't have to be tech savvy to begin,now when evaluating the different,e-commerce business models amazon drop,shipping is probably the easiest way to,start selling online,now is amazon drop shipping legal and,the answer is yes however you have to,follow their rules otherwise you risk,getting banned and according to amazon,drop shipping is allowed on their,platform but you must fulfill your goods,from a legitimate wholesaler and not,another retailer now the following,excerpt is actually taken verbatim from,amazon's website drop shipping or,allowing a third party to fill orders to,customers on your behalf is generally,acceptable if you intend to fulfill,orders using a drop shipper you must,always be the seller of record for your,products identify yourself as a sell of,your products on all packing slips,invoices external packaging and other,info included or provided in connection,remove any packing slips invoices,external packaging or other information,identifying a third-party drop shipper,prior to shipping the order and be,responsible for accepting and processing,customer returns of your products,all right so with that definition in,mind here are examples of drop shipping,that are not permitted purchasing,products from another retailer and,having that retailer shipped directly to,customers if the shipment does not,identify you as a seller of record or,anyone other than you then it's not,permitted you also cannot ship orders,with packing slips invoices external,packaging or other information,indicating a seller name or contact,information other than your own,as a result the following ways to,dropship on amazon are illegal,drop shipping from aliexpress to amazon,this is when you list a product on,amazon and aliexpress does the,fulfillment,drop shipping from ebay to amazon is,also illegal this is when you list a,product on amazon and fulfill from ebay,in fact the only legitimate way to run a,reputable drop shipping business on,amazon is to use a distributor or,wholesaler as your dropship supplier now,all shipments must be branded with you,as a seller of record and you must,remove any trace of drop shipping,providers in your packing materials in,addition amazon requires all drop ship,sellers to abide by their strict code of,conduct if you consistently violate any,of the following rules you are subject,to a suspension your order defect rate,must be less than one percent your,cancellation rate must be less than two,point five percent and your late,shipment rate must be less than four,percent now if your drop ship supplier,consistently ships products out late,then you risk getting your account,banned,so how do you land your first drop,shipping supplier well if you're looking,for legit dropship suppliers consider,using the following methods you can,contact the distributor directly every,product sold online contains a upc,barcode and by looking up the,manufacturer directly and contacting the,distributor you can ask whether they,have a drop shipping program in place,you can also attend wholesale trade,shows everywhere in the world there are,wholesale trade shows catering to,products in every category and by,attending a trade show you can quickly,and easily find dropship wholesalers all,in one place you can use a site like,wholesalecentral.com to find trade shows,in your area you can also use a dropship,directory directories like worldwide,brands pre-vet legit wholesale,distributors that offer dropshipping now,access to this directory comes at a,one-time fee now here are a list of,questions that you must ask your drop,ship supplier before you get started are,there any drop ship fees drop shipping,margins are very low and typically fall,into the 10 to 30 percent range,on top of low margins most drop ship,suppliers will also charge a per order,drop ship fee now this drop shipping fee,can range anywhere from a couple bucks,or more depending on your product in,addition you will have to pay the,shipping and handling costs for the,supplier to ship out your product to the,end customer now some drop shippers may,pad their shipping fees to make,additional margin on the transaction so,make sure you run the numbers to ensure,that you can still make a profit after,all drop shipping fees,are there any deposits or upfront,payments required some dropship,suppliers will ask for a deposit towards,future product orders upfront but over,time as trust is established you can,often negotiate payment terms and have,this deposit removed but regardless make,sure you ask your supplier how they want,to get paid some require an invoice for,every order while others allow you to,create one mass payment invoice at the,end of the day,ask for a sample invoice so you can find,out if there are any hidden or,unexpected costs do your homework,you also want to ask do you sell on,amazon because some dropship suppliers,are already selling their products on,amazon which puts your drop shipping,business at a major disadvantage because,your supplier has better pricing than,you do it's going to be difficult if not,impossible to compete directly with your,supplier,you also want to ask what your return,policy is returns are reality with any,ecommerce business and you need to know,how to get your money back for any,returned orders now in practice it can,be quite an ordeal to handle return and,typically you'll have to file an rma,with your supplier first and then have,the customer ship the product back to,your supplier directly and then once the,product is received your supplier then,reserves the right to provide you with a,refund depending on the condition of the,item you also want to ask whether they,provide an inventory data feed because,amazon's selling requirements are so,strict you have to make sure that your,inventory levels are up to date in real,time after all if you sell a bunch of,items on amazon that are out of stock,you will have to cancel those orders and,risk your account getting suspended and,in general your supplier inventory,levels change constantly especially if,they work with large retailers like,target or walmart as a result you need,to know how much product you can sell,without running out of stock,always ask your supplier if they support,edi which stands for electronic data,interchange if they can't provide you,with real-time or daily inventory,updates consider using a different,supplier because the risk of an amazon,account suspension is not worth it,you also want to ask whether the,packaging can be branded with your logo,because amazon requires you to be the,seller on record it's important that,your packaging and inserts be branded,with your stuff if your supplier refuses,to ship under your brand you should,probably pass or risk getting suspended,on amazon you also want to ask how often,they change up their product mix because,amazon is very strict about its product,listings certain products may undergo,revisions and packaging from time to,time and it's important that the product,listing exactly matches the product,shift your supplier must have a way to,notify you of any product packaging,changes and or product revisions,and to be absolutely safe make sure you,match amazon acins and upc's by hand to,ensure that your products exactly match,what your drop ship supplier is selling,now you also want to ask how are orders,submitted it is your responsibility to,submit your order data to your supplier,as soon as you make a sale on amazon as,a result you have to find out what,system your supplier uses for processing,orders and ideally this process should,be automated so you don't have to,painstakingly enter in the orders by,hand,but some unsophisticated drop ship,suppliers still use fax machines or,email,you also want to check how soon the,order is shipped to keep your amazon,account in good standing your orders,have to be shipped out on time if your,supplier is late with their shipments,you will take the blame and risk getting,your entire account suspended ask your,supplier what their track record looks,like for shipping and whether they offer,any guarantees now once an order ships,your supplier also needs to provide,shipping and tracking information to you,electronically every amazon order,requires this information and it's your,job to submit it,now with that in mind let's talk about,some of the pros and cons of amazon drop,shipping starting with the pros now,assuming you have a drop ship supplier,in place let's do a deep dive into the,pros and cons of drop shipping on amazon,as an online business model here are the,main advantages of drop shipping on,amazon amazon's a huge marketplace at,the time of this video amazon has over,50 market share for all of e-commerce as,a result amazon is by far the largest,online retailer in the us and when it,comes to launching your own online store,most people are concerned with how to,generate traffic and amazon largely,solves the traffic problem for you every,day amazon has billions of shoppers,looking to buy the products you have to,sell and by piggybacking your products,on existing listings and winning the buy,box you can leverage the amazon sales,channel to make sales immediately,it's also very easy to set up because,most people are afraid of the technical,aspects of starting their own e-commerce,store but with amazon you don't need to,be tech savvy at all you don't need a,website you don't need a hosting company,nor do you need to know anything about,conversion optimization,all you need is an amazon seller's,account and you can start selling your,products online and in most cases you,don't even need to create a new listing,because one already exists as a result,you may not even need to take product,photos or purchase upc codes,just make sure you read the amazon,seller agreement in terms of service,before you start selling now the other,pro is that amazon drop shipping is not,risky and in fact amazon drop shipping,probably has the lowest barriers to,entry of any ecommerce business model,with a free amazon seller's account you,can literally start making money right,away without any money required up front,you don't need to buy inventory and as a,result you don't have to worry about,cash flow unsellable products or,clearance items at all there are no,overhead costs and no inventory risks,which means that practically anyone can,do this with zero experience,now here are the downsides the main,advantage of drop shipping on amazon is,that it's easy to get started but just,because something is easy doesn't mean,that it's better and in my experience,easy almost always means that it's not,worth doing amazon drop shipping has a,huge list of cons which i'm going to,talk about right now,first off drop shipping margins are,razor thin the margins for drop shipping,on amazon are already very low and,depending on the supplier and the,product for sale drop shipping typically,carries a 10 to 30 margin now for,certain products i've seen margins as,high as 50 but that's definitely not the,norm meanwhile it can be quite expensive,to sell on amazon for example amazon,typically takes 15 percent of your top,line revenue right at the bat as amazon,selling fees if your margins are only 30,percent that means you only have 15,percent left over to play with and with,such low profit margins any minor slip,up can ruin your business and to realize,why it's important to understand how,selling on amazon works drop shipping,other people's products on amazon is,predicated on winning the buy box and,maximizing your gross profit margins and,chances are you will not be the only one,on amazon selling your exact same,products as a result you constantly have,to pay with your pricing to compete with,other sellers and usually the lowest,price wins the buy box unless you have,the best margins for your products it,will be extremely difficult to win the,buy box and still make an acceptable,profit after you subtract amazon's fees,and i've seen this time and time and,again amazon drop shippers often find,themselves in a price spiral to the,bottom because every seller lowers their,prices to fight for the buy box low,margins also means that you can't spend,money on advertising and promotion,processing customer returns can be a,major issue as well because amazon's,return policy is so liberal you'll often,have to eat the cost of a return if your,products are not returned in sellable,condition prices on amazon are dynamic,and change constantly similarly your,supplier prices also change on a regular,basis unless you watch both amazon and,your supplier prices like a hawk it's,very easy to either lose out on,potential sales or lose money altogether,on sales due to out-of-date supplier,pricing as an amazon drop shipper it's,almost impossible to manually change,prices for all of your amazon listings,and account for supplier pricing changes,at the same time without purchasing an,automated tool and amazon repricing,tools are expensive and will incur,additional overhead on a business that,already has razor thin margins,an amazon drop shipping business is also,not a sellable asset unlike a,traditional drop shipping store an,amazon drop shipping business is not a,sellable asset after all you don't own a,single thing when you drop ship on,amazon you don't own the marketplace you,don't own the customers you don't even,own the products with the amazon drop,shipping model you are basically a,worthless middleman peddling goods that,you don't even own or control,sure you can make some short-term money,this way but it's cash flow not an asset,amazon also hides customer data from you,according to banning co repeat business,is the lifeblood for any e-commerce,business and a five percent increase in,customer retention can result in an,increase in 75 percent to the top line,however amazon hides all customer data,from you as a result you can never build,a meaningful relationship with your,audience nor can you ever intentionally,sell to them again,as an example my e-commerce store over,at bumblebeelenders.com only has a 12,repeat customer rate but that 12,represents over 36 percent of my yearly,revenue i have colleagues who run stores,where over 50 percent of their sales,come from existing customers because,amazon prevents you from contacting your,customer you're missing out on a lot of,sales,and the final nail in the coffin is that,most drop ship suppliers won't work with,you when interviewing wholesale,suppliers a common question they'll ask,you is whether you have a real physical,storefront or an online store after all,most drop shipping suppliers do not want,you to sell their products on amazon and,why is that it's because suppliers don't,want a bunch of different companies,creating a price war on amazon typically,a supplier will either sell on amazon,themselves or pick a few key businesses,to be amazon sellers on their behalf,now selling wholesale is much less risky,and lower maintenance than being a drop,shipper which makes working with amazon,drop shipping businesses less desirable,from a third party supplier standpoint,amazon businesses are also very fragile,because they can ban you at any time,remember all the stringent requirements,that amazon imposes on their sellers,mentioned earlier in order for any,amazon drop shipping business to be,successful your suppliers must be,top-notch they got to ship out all,orders on time they must electronically,provide inventory accounts they must,electronically provide product detail,changes basically you are heavily,dependent on your drop shipping supplier,and it's very easy for a screw-up,outside of your control to take down,your entire business,for example if you accidentally forget,to shut down your listing due to a stock,out and you generate a bunch of sales,you can't fulfill your amazon seller,account will probably get banned if your,supplier accidentally ships a bunch of,items that don't exactly match your,amazon prac listing you'll probably get,a bunch of complaints and get banned,if your supplier screws up and ships out,a bunch of orders late you will probably,get banned but don't take my word for it,my friend john rampton used to run a,seven figure amazon drop shipping,business until he got banned from amazon,and lost everything overnight here's a,podcast interview i conducted with them,if you want to hear it firsthand,now is amazon drive shipping profitable,now while amazon drop shipping is an,easy business model start it's actually,difficult to master if you want to make,significant money online because your,margins are so low you can only make,significant profit at scale,bottom line you need to sell a bunch of,different products drive down your costs,and make sure that your amazon listings,are dynamically price optimized,meanwhile you have to make sure that,your inventory accounts and product,descriptions are always accurate to,prevent your account from getting banned,as a result you can't do any of this by,hand and you have to rely on software to,manage your operations and here's what,you need to automate just as a taste in,order to even have a chance of making a,profit you have to automate purchase,order creation repricing inventory,listing management product data syncing,and order tracking,basically every area of your amazon drop,shipping business needs to talk to each,other and amazon dropshipping success is,a low margin volume game with very high,risks you can make money with this,business model only if you scale and any,mistake can mean losing your entire,business overnight my friend john,rampton learned this the hard way will,you,hope you enjoyed this video now if you,like what you saw there's actually a lot,more where that came from if you,subscribe to my channel below and if you,are interested in learning how to sell,physical products online then click over,here and take my free six day mini,course where i'll walk you through,everything that you need to know to get,started in e-commerce thanks for,watching

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